A consensus is emerging that in the settlement of the lawsuit by 12 attorneys general against Paramount Skydance, California Attorney General Rob Bonta caved. That Paramount got what it wanted – a green light to proceed with its $110 billion acquisition of Warner Bros. Discovery, without many restrictions.
The consensus isn’t wrong in the sense that Paramount didn’t have to provide any structural changes to the deal to get to a settlement. The consent decree requiring the production of 30 films a year — including both blockbusters and independents — $1.5 billion over five years invested in U.S. production and continuing to operate the cable companies separately were all things Paramount CEO David Ellison would have agreed to months ago. He pretty much said so in his New York Times op-ed piece in August.
As for the news “oversight board” meant to ensure editorial independence for CNN and CBS News, I doubt that will be something we hear from very much. A bunch of former journalists are going to stop the 24/7 news juggernaut that is CNN from functioning? Right. From what I’m told on the Paramount side, the intention is to allow CNN to continue functioning as it does. (Though in a world where Trump bans the network from the White House, that may make for some interesting conversations in the board room.)
Bonta had been saying for weeks that he was not seeking a remedy. He said he was seeking to actually stop the merger. But that, transparently, became impossible once Paramount threatened to leave California.
Ellison made clear that he was prepared to leave the state where the entertainment industry is based. Leaks abounded that executives were shopping for housing. That Paramount was negotiating for office space in Nashville, or Texas. And that Larry Ellison had made good on this in 2020, moving Oracle’s corporate headquarters from Silicon Valley to Austin, Texas.
Bonta lost his ability to maneuver when California Governor Gavin Newsom, L.A. Mayor Karen Bass and gubernatorial candidate Xavier Becerra all urged a settlement. Without the backing of his own state’s power players, Bonta had little negotiating space.
And then on Sept. 12 came the “leak” of a report by the Los Angeles Economic Development Corporation, estimating that Paramount moving out of the state could resulted in the loss of up to $21.2 billion in annual economic output, 57,980 full-time jobs and $1.17 billion in state and local tax revenues.
The jig was up. On one side of the arena you had these stakeholders lined up and shouting: Settle. That included the Hollywood guilds, studio CEOs like Lionsgate’s Jon Feltheimer, and exhibitors like AMC Theatres and Regal. And all of Bonta’s political allies in the state.
On the other side shouting Fight you had Mark Ruffalo, Jane Fonda, activist attorney Norm Eisen and Sen. Elizabeth Warren.
This is not difficult math. Karen Bass is up for reelection in November. Becerra is aiming to become governor of the country’s biggest state. Newsom is about to leave office and try to become the president of the United States. None of those politicians can afford to have Paramount leave the state on their watch.
Bonta was in an impossible vise and did what he had to do, extracting the best concessions available at that point. And that point came quickly.
Over the weekend, I reported that a novel maneuver might be used to close the gap and settle the lawsuit, a “hold separate.” That would have held Warner Bros. Discovery separate from Paramount Skydance through the end of litigation, allowing the merger to proceed provisionally. Used in the 2018 DOJ challenge to AT&T’s purchase of Time-Warner, it would have avoided the dreaded ticking fee and created a path for the deal to close and Bonta to save face. (Because the trial probably would never have come to pass.)
That didn’t happen. It was one option being held by Paramount. But it turned out not to be necessary. As my original source put it: “Bonta had no cards. At least he was smart enough to settle.”
